$SPZ announces the successful completion of the institutional component of the capital raise to fund the US acquisition of Peak Parking.

ASX Announcement

Paul Gillespie says: “We are delighted with the support for our growth strategy and H1 FY25 results. We appreciate the support from our shareholders for the raise and welcome new investors to SPZ. With these funds we will be able to complete the acquisition of Peak Parking and build a high quality business in the world’s largest parking management market.”

Market also seems positive..... as it should IMO.

Disc: Held

This morning $SPZ announced their 1H Results as well as the proposed acquisition of US-based Peak Parking LP for US$36.0m with an associated capital raising via an entitlement offer and a fully underwritten institutional placement.

It would be easy to focus on the acquisition – exciting that it is – however, in this straw I will focus on the operational performance for the half, leaving the proposed acquisition as a separate matter.

1H FY25 Highlights

Financial Highlights

• Revenue of $31.9m up 20.0% to pcp
• Adjusted EBITDA of $9.5m up 26% to PCP and Adjusted EBITDA Margin of 29.8% up 139 bps
• EBITDA of $9.19m up 34.6% to PCP
• "Adjusted free cash flow" (excluding growth capex) of $6.4m up 60% to PCP
• Cash of $8.5m up 17%
• EPS of $1.12 ($1.11 diluted) up 70%

Operational Highlights

Good growth in all markets, with accelerating PBN growth in the UK +18% (vs +13% in pcp) and strong growth in the profit contribution in NZ.

Losses in Germany continue to narrow, and a good start in Denmark.

My Observations

This is a good operating result. $SPZ have delivered another year of +20% revenue growth, with operating leverage driving strong EPS growth of +70%,

The UK continues to be the engine room driving almost 80% of revenue and 88% of adjusted EBITDA.

It is pleasing to see a meaningful contribution coming through from NZ, and it is still early days in Germany and Denmark, although German with sites up to 72 from 43 in the PCP, only added +5 from the EOFY 2024.

On the other hand, Denmark has gone from 11 contracts and no reported operating sites at EOFY24, to now have 21 up and running.

The new growth markets of NZ/Ger/Den are starting to make a more material contribution with aggregate PBNs growing +43% in the half vs. the PCP, compared with the more mature UK growing at a still decent (and in fact accelerating) +18%.

On cash generation, $SPZ’s curious “Free Cash Flow” of $6.4m (defined on slide 32), compares with the FY value of $12.2m – so it seems only a modest increase on a pro rate basis. The historical 1H/2H split for 1H FY24 was 49.3% of cash receipts, so their doesn’t seem to be a strong seasonal effect.

The seemingly impressive operating leverage and strong NPAT growth hides two factors. First, a currency tailwind giving a windfall of $0.74m, offsetting significant expenses growth: raw materials and consumables (+20% - in line with revenue growth), employee benefits expense (+28%), D&A (+35%), rent and leases  (+52%) and other expenses (+18%).

In isolation, these cost increases might appear to be a cause for concern. However, it is important to understand that these expense lines include the impact of the expansions into Germany and Denmark, and doubtless too, the costs for a year of prospecting for acquisitions in the US.

Overall, then, the net cash generation of +$1.3m is a good result. Cash contributions from UK and NZ, more than covering the net costs of getting started in Germany and Denmark and the hunt for acquisitions.

My Key Takeaways

The business continues to allocate capital from profitable core operations into expanding the business. All markets are growing – UK and NZ strongly, Denmark is off to the races, and Germany is making slower progress.

CEO Paul Gillespie reiterated the strategic goal of achieving organic growth of doubling the business to 3,000 ANPR sites by December 2028. Achieving that from today’s total of 1561 (including the suspended 71 in QLD), represents a CAGR from end of 1H FY25 to 31 December 2028 of 18%. This can be considered in the context of the latest growth rate of 28% (to pcp) and with the US soon to provide a new beachhead for growth.

Tomorrow, I’ll write up my appraisal of the proposed US acquisition deal. But, operationally, the meter at $SPZ is ticking along nicely.

Disc: Held in RL and SM

Canaccord Genuity have published an update to their view on $SPZ ahead of Monday's HY Results (call at 11:30 AEDT).

Report gets issued as part of the Free ASX Equity Research Scheme.

Canaccord Genuity Report

Their PT at $1.10 unchanged from their last upgrade in November, which was from $0.75, following the announcement of he increased debt facility.

Basically, some things to watch: i) progress on the business in last 6 months, particularly recent market entries; ii) update on new market entry; and iii) any progress on discussion with QLD Government, now the new Government has been in place a few months.

I'm not expecting anything on ii) as that will likely be deal driven. So, when it happens, that's when we'll find out.

Key positive in the note is that things look quiet for now on the regulatory front in the UK, which is consistent with my media scan of the issue, although press stories do pop up from time to time. Guardian Article, January

I realised I haven't posted my valuation here. Will do next week.

Disc: Held

ASX Announcement

Looks like $SPZ is gearing up for its next market entry acquisition.

Pass the popcorn.

StrawPoll: where a) FL b)TX c) Other Scandinavia d) Other EU?

@Strawman - have you ever thought about developing a "StrawPoll" feature on the platform? It might not be that easy, but it could be fun!

$SPZ held their AGM this morning.

A few positive updates, with the two key slides added below:

• 1Q FY25 is off to a good start: revenue up 24% and Adjusted EBITDA up 30%, both to PCP
• The 1500 site YE target has been achieved ahead of plan (1529 at 15 Nov) - note this targt had been accelerated from EOFY25
• A new long term target to achieve 3000 organic sites, doubling the business, by December 2028

CEO Paul noted that it's taken them 10 years to get to 1500 sites, and they now aim to add the next 1500 in 4 years.

Work on new markets in Scandinavia and the US (Texas, Florida) is progressing. Focus is now on finding the right entry point.

Demark is off to the races with contracts being signed.

UK - single industry code of practice agreed, no issues flagged under the Labour Government - regualtory environment appears stable for now. Paul thinks the Government will now monitor and see how the industry functions under the unified code.

Churn remains low at 30-40 site p.a.: mix of site redevelopments, exits initiated by $SPZ, and some losses to competitors.

Conversations under way with the new QLD LNP Government - warm but non-specific noises. Expecting movement in the New Year. Paul said he is confident they will return.

Overall, this is a company that is continuing to deliver, with a management who appear confident across all markets, with a clear focus on both operational delivery and growth.

On Valuation:

Market likes today's update. With SP at time of writing at $0.82, getting towards the upper end of my valuation. So, at 3.8% in RL, I'm a hold here. Need to update valuation in the light of the 3000-Dec. 2028 growth target.

Disc: Held in Rl and SM